Collection Success Rate Dependent on Length of Delinquency

May 11, 2008

Cash flow is the engine that drives healthcare businesses large and small. Delinquent accounts are the brakes that bring healthcare companies to a screeching halt. A past survey of members of the Commercial Collection Agency Association of the Commercial Law League of America compares the collectability figures for 2000 and 2001. The survey clearly shows that the probability of collecting a delinquent account drops dramatically with the length of delinquency. For example, after three months, the probability of collecting delinquent accounts drops to 69.6%. After six months, collectability drops to 52.1%. And after one year, the probability of ever collecting a delinquent account drops to 22.8%. I believe these same statistics hold true today. The results of this survey (and our own experience!) clearly demonstrate the critical importance of taking positive action when an account receivable ages past its due date.

For example, information from the Performance and Practices of Successful Medical Groups 2007 Report Based on 2006 Data with data for multi-specialty practices that were better performers in Accounts Receivable as well as other practices.

                                                              Better             All

Percent of total A/R 0-30 days                  63.28%          53.73%

Percent of total A/R 120+ days                 10.26             17.21%

Total A/R per FTE physician                     $85,659       $121,284


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